A report that Greece will have do yet another restructuring of its debt added to concerns about whether higher borrowing costs for Spain are a precursor to the country seeking a bailout and an unsettling downgrade by Moody's Investor Services.
The S&P/TSX composite index slid 78.59 points to 11,466.95 amid a positive report from Rogers Communications (TSX:RCI.B). The TSX Venture Exchange was down 7.69 points to 1,166.47.
The Canadian dollar ticked 0.35 of a cent lower to 98 cents US as nervous investors piled into U.S. Treasuries. The yield on the U.S. 10-year Treasury went as low as 1.4 per cent.
"It’s still a matter of risk-on, risk-off," said Ian Nakamoto, director of research at MacDougall, MacDougall and MacTier.
"Sometimes you feel regulatory officials and companies are handling these challenging times quite well and other times you feel scared. There is no better gauge than looking at U.S. 10-year bond yields, which have hit an all time low."
Apple Inc. (Nasdaq:AAPL) shares plunged nearly six per cent in after-hours trading following its post-market close report that third-quarter earnings per share were US$9.32, missing analysts' expectations of US$10.37 by a full dollar. Revenues were $35 billion, while analysts expected $37 billion on lower iPhone sales.
Weak earnings reports from DuPont and United Parcel Services also pressured U.S. markets. But indexes closed off the worst levels of the session after the Wall Street Journal said the U.S. Federal Reserve is moving closer to applying further stimulus measures to support the economy.
The Dow Jones industrials dropped 104.14 points to 12,617.32.
The Nasdaq composite index was off 27.16 points to 2,862.99 and the S&P 500 index lost 12.21 points to 1,338.31.
Stocks were negative on worries that Spain may need a full-blown sovereign bailout. The country has been mired in recession and its banks are saddled with billions of euros in toxic loans arising from a collapsed real estate market.
"The rain in Spain comes back again," added Nakamoto.
Confidence about Spain's ability to deal with its finances has taken a beating, with the country forced to pay ever higher yields in order to finance its debt. The yield on its benchmark 10-year bond surged well past the seven per cent mark Monday, a level considered unsustainable.
The yield on the country’s 10-year bonds was up another 0.11 percentage points Tuesday at 7.54 per cent, while the IBEX 35 stock index in Madrid was 3.6 per cent lower.
Losses on North American markets picked up amid media reports that three EU officials believe Greece will have to restructure some €200 billion in debt, which would place more strain on the European Central Bank and the other 16 eurozone countries.
The report surfaced a day before representatives of Greece’s creditors are due in Athens for weeks of talks ahead of their next report on Greece’s austerity program, on which continued payment of bailout money hinges. Greece depends on rescue loans from its European partners and the International Monetary Fund to keep paying for vital public services and servicing its loans.
Adding to market pessimism was a move by Moody's Investor Services late Monday to lower the outlook on Germany's AAA rating to negative from stable due to mounting uncertainties from the eurozone debt crisis.
Moody's also downgraded the outlooks on the Netherlands and Luxembourg and affirmed Finland's AAA rating.
The agency noted that the cost of supporting Italy and Spain in the eurozone would fall most heavily on better rated members "if the euro area is to be preserved in its current form."
Moody’s also said there was an "increased likelihood" that Greece would leave Europe’s monetary union.
The telecom sector led TSX advancers, up 1.44 per cent even as Rogers Communications Inc. reported net income declined 2.4 per cent to $400 million, or 75 cents per share. But adjusted earnings of $478 million, or 91 cents per share beat estimates by five cents. Revenue was $3.11 billion, up slightly from $3.1 billion in the comparable period, but below expectations of $3.14 billion. But its shares jumped $1.77 to $39.01. Elsewhere in the sector, BCE Inc. (TSX:BCE) gained 49 cents to $41.79.
Commodities were mixed Tuesday after demand worries and a rising American currency impacted prices for oil and metals on Monday.
The gold sector was ahead slightly with the August bullion contract closing down $1.20 at US$1,576.20 an ounce. Goldcorp Inc. (TSX:G) edged up 19 cents to C$33.66 .
The energy sector fell 1.84 per cent while the September crude contract on the New York Mercantile Exchange shook off early losses to gain 36 cents to US$88.50 after plunging almost $4. Canadian Natural Resources (TSX:CNQ) lost $1.11 to C$27.67.
Husky Energy Inc. says weaker commodity prices helped pull second-quarter net earnings down to $431 million, or 43 cents per share, from $591 million, or 60 cents per share, a year ago. Its shares lost early momentum and declined 28 cents to $24.84.
The base metals sector slipped almost one per cent with copper prices off three cents at US$3.35 a pound after falling seven cents on Monday. Teck Resources (TSX:TCK.B) declined 39 cents to $29.41 while Ivanhoe Mines (TSX:IVN) gave back 27 cents to $8.10.
The financial sector dropped 0.85 per cent with Royal Bank (TSX:RY) down 70 cents to $50.82.